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SEC ends crypto drama by greenlighting 11 Bitcoin ETFs
The moment the crypto world was hoping for finally happened on Wednesday. And this time it was real.
Regulators on Wednesday gave fund managers the green light to launch 11 Bitcoin spot exchange-traded funds, allowing ordinary investors to gain exposure to the world’s largest cryptocurrency without having to own it.
The ETFs, which begin trading Thursday, could make bitcoin a potential staple of 401(k), IRAs and retirement plans and give it mainstream acceptance.
The Securities and Exchange Commission made the announcement about 24 hours after a false social media post claimed those approvals had already been granted.
The chaos sparked by that unauthorized post on of the main players in cryptography.
Bitcoin’s price lurched Tuesday and Wednesday as investors tried to make sense of the incident, which wiped out tens of billions of market value in just a few minutes.
SEC Chairman Gary Gensler made clear in a statement Wednesday that his agency “did not approve or endorse bitcoin” when approving the new products and called Wednesday’s announcement “the path to follow the most lasting” after a key legal defeat on this issue last. summer.
“Investors should remain cautious of the myriad risks associated with bitcoin and products whose value is tied to crypto,” he said in his statement.
Gary Gensler, Chairman of the Securities and Exchange Commission. (Jonathan Ernst/REUTERS) (REUTERS / Reuters)
An SEC commissioner, Caroline Crenshaw, issued a dissenting opinion calling the agency’s actions “unsound and ahistorical.”
“I fear that these products will flood the markets and land squarely in the retirement accounts of American households who can least afford to lose their savings to the fraud and manipulation that appears to be prevalent in the markets in the counting bitcoin,” she said in her statement.
The SEC has rejected such requests in the past, arguing that the products were vulnerable to market manipulation.
The list of candidates approved by the SEC on Wednesday included some of the biggest names on Wall Street, from BlackRock (BLACK) to Franklin Templeton (BEN), as well as a number of more well-known companies in the crypto world.
These issuers competed before launch to offer the lowest fees, hoping to attract as many investors as possible once the ETFs begin trading.
Other big Wall Street players also plan to get in on the action. JPMorgan Chase (JPM) and Goldman Sachs (GS) are among the giant banks that have offered to help some of these fund managers create and redeem shares in their new funds.
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Optimism about these approvals helped Bitcoin jump of 164% in 2023 And start 2024 by surpassing $47,000, its highest level in almost two years.
A decade in the making
The crypto industry has been waiting for this moment for over a decade.
The first application to create a spot bitcoin ETF came in 2013 from crypto entrepreneurs and twins Tyler and Cameron Winklevoss, famous for their early role in the creation of Facebook.
Entrepreneurs Tyler and Cameron Winklevoss. (Lucas Jackson/REUTERS) (REUTERS / Reuters)
Since then, the SEC has denied more than 30 similar requests.
A key turnaround moment occurred last year in June when the world’s largest fund manager, BlackRock, filed for a spot Bitcoin ETF. Interest from one of Wall Street’s biggest names has prompted other asset managers to follow suit.
Another significant development occurred last August when one of the ETF applicants, Grayscale Investments, won a key legal victory against the SEC. Grayscale had sued the SEC in 2022 after it was not allowed to convert its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin offer.
His main argument was that the agency had already approved exchange-traded products containing Bitcoin futures and had therefore “acted arbitrarily and capriciously.”
A three-judge panel of the District of Columbia Court of Appeals in Washington sided with Grayscale, saying the company had “advanced substantial evidence” that its product was similar to Bitcoin futures ETFs previously approved by the SEC.
This forced the SEC to reconsider Grayscale’s spot Bitcoin ETF application, as well as others filed by rival fund managers.
“We are now faced with a new set of cases similar to those we have disapproved of in the past,” Gensler said in his statement Wednesday. “But circumstances have changed.”
One of the candidates, Cathie Wood, CEO of Ark Investment Management, told Yahoo Finance that the dominant spot Bitcoin ETF providers will be those who receive the most money from investors up front.
The winners “will be a few and they will be the most liquid,” she said.
Cathie Wood, CEO of ARK Investment Management. (David Swanson/REUTERS) (REUTERS / Reuters)
Historically, launches of other Bitcoin products have driven up the price of Bitcoin.
This happened in 2017 with the launch of the country’s first Bitcoin futures contracts, and then in 2021 with the SEC’s approval of the first Bitcoin futures ETFs. Prices skyrocketed and then fell significantly in the year following the launches.
In recent weeks, much debate has raged over whether bitcoin would rise or fall once the vaunted moment of approval passes.
Gautam Chhugani, managing director of Bernstein’s research arm, said his team estimates these financial products will generate $10 billion or more in investment flows through the end of 2024 and “hundreds of billions of dollars” over a period of two years.
This, he added, will help drive the price of Bitcoin even higher.
“We believe bitcoin will reach $150,000 by 2025,” Chhugani added.
David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto and other areas of finance.
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